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Sustainable development and economic progress

Back in 2010, having not studied formally for over eight years, I took a risk and signed up for a postgraduate module in Understanding Sustainable Development, run by the Centre for Development, Environment and Policy (CeDEP). CeDEP runs distance learning courses through SOAS, where I took my MSc in Political Economy of Development in 2000-01.

Distance learning requires plenty of motivation. CeDEP did offer support through an online forum, but I was largely on my own. It was mostly a fascinating course, and broadened my outlook as to what constitutes ‘development’. My earlier MSc, while it focussed on development as largely synonymous with industrialization and social transformation, did not dispute the nature of measures of national income and output (GNI, GDP etc) and their sufficiency for measuring development.

So what is sustainable development? Simply put, it is a balanced union between economic, social and environmental factors in the development process. For example, if economic growth in a country is rapid, but leads to massive inequality and consequentially social unrest, or creates huge levels of pollution which ultimately need to be controlled, then that growth is considered not to be a form of sustainable development. All three factors need to be taken into account in the latter; none must be neglected. For a real world example, growth in China has in recent decades been rapid, but has come at a large environmental cost, which needs to be remedied. The Chinese economy has been slowing in 2015, and shows signs of overinvestment in manufacturing capacity and infrastructure; so even in the economic sphere, there has probably been a lack of sustainability. Of course, all economies go through growth slowdowns and recessions now and again, and while they can be mitigated through government policies, they are probably unavoidable and necessary to encourage economic restructuring.

One of the ideas that can be drawn from the study of sustainable development, is that traditional measures of economic progress are inadequate. GDP (Gross Domestic Product) or GNI (Gross National Income), measure material changes in welfare, but these might include the costs of cleaning up pollution, or paying for an expensive war. If the pollution had been avoided in the first place, GDP growth might have been slower due to environmental regulations or taxes that limit polluting forms of business activity. Furthermore, without the subsequent clean-up costs, a further relative diminution in GDP would take place afterwards. However, overall welfare might have been enhanced. Another complicating factor is that the health problems caused by pollution might lead to increased healthcare costs at some point in the future. If the latter is funded privately, then its cost would raise GDP, but if they are funded through taxation or social insurance, then higher taxes could potentially lower GDP, if the taxes reduce private sector growth in some way. On the other hand, a healthier, longer-lived workforce could benefit from there never having been pollution in the first place, if we are talking about vehicle emissions and those living nearby. This could make the workforce more productive for longer, boosting GDP.

The use of the planet’s natural resources and damage to eco-systems also have an ambiguous relationship with GDP over time. Using up these kinds of resources as ‘factors of production’ in producing economic output adds to GDP in the short run. However their depletion may decrease future levels of output, unless their content in products is recycled or the particular eco-system manages to recover through changed human activity. Managing the current production process so as not to harm the prosperity of future generations is called intergenerational equity and is a key idea in the analysis of sustainable development.

Turning to social factors, high and rising inequality of incomes and wealth could potentially undermine development if particular groups in society lose too much from the growth process. If they can mobilize politically, they have the potential to change the balance of power in society and possibly the subsequent pattern of economic growth. They could hold back growth if the government is forced to engage in a substantial redistribution of income through the tax system; of course, the economic outcome of such a change is indeterminate in this simple example. Altering the distribution of income and wealth could potentially raise or lower the growth rate, depending on a range of factors which I will not examine here. There is plenty of attention given to high and rising inequality in economic debate at the moment, and some studies have shown that it may lower growth rates, so that some increased degree of social justice can increase the growth rate. The latter idea seems to offer a win-win outcome for those on the left politically, but these ideas remain controversial.

Drawing on my earlier studies in development economics at SOAS, I am critical of some of the implications of sustainable development. In particular, I would argue that all sustained growth patterns involve a social transformation, whether in the transition to capitalism and during the industrialization process, or even in rich countries. Economic growth may therefore necessarily involve injustice as property rights change, wealth for investment purposes is concentrated in the hands of the few and the masses are separated from the means of production and are forced to work for a living wage. Capitalism is often unfair in its impact on different social groups. So social sustainability remains an ambiguous concept when examining the history of social transformations as part of development. Governments in rich countries with a democratic mandate are more likely to compensate the losers from economic change through the tax system, but in developing countries, growth can be more socially costly, despite being sustainable in the longer run.

The question of environmental sustainability is also a controversial one. No-one can argue that damage to eco-systems that impacts on future human prosperity is sustainable. However the depletion of certain natural resources may not be a problem if their content can be recycled for future use, or if it does not damage eco-systems as well. If we run out of copper, we may be able to invent new technologies which can replace it. Copper mining itself may damage the environment but that is a different question.

Sustainable development is thus a useful concept and forces us to take a longer-term and broader view of development and its impact socially and environmentally as well as economically. The idea of sustainability itself is still a little vague. What is a sustainable system? Answer: one which can be sustained. This implicit view can lead to a broad applicability of the concept and some ambiguity. If we accept that poorer countries need to be given the space to develop and that this necessarily involves social and environmental transformation, we can try to manage the process in way that is sustainable through foreign aid and the promotion of technologies that have a reduced environmental impact. It is unlikely that the planet can survive the same development process as the current rich countries went through being applied in all of the poorest countries. Human ingenuity is therefore needed to produce environmental sustainability in the development process for the sake of future human survival.

NB. This post was inspired by the WordPress Daily Prompt, which can be found here. This was today’s task in the Blogging101 course I am following.

About Me

I have an MSc in development economics from SOAS, University of London and, while I now work for a charity, I remain passionately interested in the subject and how it can be used to promote sustainable human progress.
Apart from economics, I enjoy reading, walking, Qi Gong exercise, classical music, following professional tennis and athletics and spending time with friends and family. I also take an interest in politics, usually focussing on policy rather than personality, so that I don’t get too fed up with it.